Sabina reports with a bit of dry humor.
Basically Deep Seek was just the beginning.
More advances in AI, Quantum Computing, Semi Conductors (Own machines coming for the monopoly ASML has) Next generation chip manufacturing.
Also, China is leading in Scientific papers.
6:38 total length.
Cheers
Qazulight
That is true. China is leading.
But so was the US from 1950 to 1980. Demand side economics.
China is about to lose the US financing that makes it all possible. It is the best feature of the tariffs.
https://www.aspi.org.au/report/aspis-two-decade-critical-technology-tracker
The Critical Technology Tracker is a large data-driven project that now covers 64 critical technologies spanning defence, space, energy, the environment, artificial intelligence, biotechnology, robotics, cyber, computing, advanced materials and key quantum technology areas. It provides a leading indicator of a country’s research performance, strategic intent and potential future science and technology capability.
These new results reveal the stunning shift in research leadership over the past two decades towards large economies in the Indo-Pacific, led by China’s exceptional gains. The US led in 60 of 64 technologies in the five years from 2003 to 2007, but in the most recent five years (2019–2023) is leading in seven. China led in just three of 64 technologies in 2003–20074 but is now the lead country in 57 of 64 technologies in 2019–2023, increasing its lead from our rankings last year (2018–2022), where it was leading in 52 technologies.
China’s new gains have occurred in quantum sensors, high-performance computing, gravitational sensors, space launch and advanced integrated circuit design and fabrication (semiconductor chip making). The US leads in quantum computing, vaccines and medical countermeasures, nuclear medicine and radiotherapy, small satellites, atomic clocks, genetic engineering and natural language processing.
India now ranks in the top 5 countries for 45 of 64 technologies (an increase from 37 last year) and has displaced the US as the second-ranked country in two new technologies (biological manufacturing and distributed ledgers) to rank second in seven of 64 technologies. Another notable change involves the UK, which has dropped out of the top 5 country rankings in eight technologies, declining from 44 last year to 36 now.
When corporate taxes were 50% there was a lot more R&D in the US. We led.
At that time, weren’t companies required to either invest their earnings in the company, or pay them out to shareholders? If so, then the company had more incentive to invest, and, with a 50% tax rate, investments that could be expensed were effectively receiving a 50% subsidy. But now, companies have the “freeedom” to use their money for financial speculation and manipulation, instead of productive investment.
“JCs” have also decided they don’t need much of an education system in the US. They seem to expect they can obtain all the high skilled people from abroad, who were educated at someone else’s expense, so they have more money for themselves.
The US has been on this road a long time.
Steve
I took to a couple of quick google searches but you’d need to find that. I can’t.
Tax on excess retained earnings is still a thing.
But stock buybacks became legal in 1982, so that gives a company a means to burn excess retained earnings, for the enrichment of holders of stock and options, without doing anything productive with the money.
Somewhere in the late 80s, I noticed that Tandy, RS’ parent company, would have had a drop in EPS, but bought back just enough stock that quarter, for EPS to be up y/y.
Steve
And they cost less.
We could address that salary issue and obtaining the “best & brightest”.
Because so many more people want an H1-B visa than there are visas available, a lottery is held. The lottery does not look at the quality or credentials of the applicant; he’s just thrown into the hopper to try his luck. All that is needed is the minimum qualification to enter, so many excellent candidates to fill jobs badly needed in the U.S. are never even considered.
The law says H1-B workers are supposed to be paid the prevailing wage for their job, based on the Department of Labor statistics. In reality, the Economic Policy Institute found that 60 percent of H-1B positions were assigned wage levels well below the local median wage for the occupation. A Government Accounting Office report found between June 1, 2009, and July 30, 2010, 83 percent of H-1B jobs were certified at Level 1 (Entry-level.) This does not mean the workers themselves were entry-level, only that to save money some highly-skilled workers were down-labeled to make them cheaper to hire.
Companies get low-cost employees, and the worker himself considers the eventual green card enough a part of his compensation that he tolerates the lower wage. The H1-B workers can’t complain too much; Their visa is for a specific company and they are like indentured servants, unable to change jobs freely. They have to take what they are given. Too bad about the displaced American workers priced out of the market.
Something like that. There was a tax on excess retained earnings, but I have no idea how that was calculated - or if it was even enforced.
That said, companies had an incentive to either reinvest in the company to try to grow even more, or to pay out their earnings to the owners of the company. Those incentives no longer exist.
It is an interesting accounting history but stock buybacks would not be expensed against corporate taxes.
Corporate taxes at 21% we do have factories built here but not to the critical mass of economies of scale.
The stock buybacks would be charged against equity. That is why we see companies that claim to be making buckets of money, yet have little or no equity. Buybacks juice the price of the stock, which is a way to line the pockets of those with shares, or options, while incurring zero personal tax liability, over the short term. Over the long term, it hollows out the company, but the CEO doesn’t care, because he will have retired, before the collapse.
Steve
We are seeing different turnouts of CEOs depending on how the wind blows. This is not over with yet.
What we need is the factory buildout. We began to get that in 2022.
Leaving the “jobs” overseas avoids all that “intrusive, burdensome, big gummit regulation”. No visa “lottery”. No “prevailing wage”. You hire all the engineers you want, in Bangalore, and keep them in Bangalore. Only employees the “JCs” need in the US are people with Bantu education to polish their jets and yachts.
Steve
I bet with computer programs the US legal regulations are easy to build anywhere.